ABS, Satmex Banding Together for Boeing Satellite Buy
WASHINGTON — The decision by regional satellite operators Asia Broadcast Satellite () of Bermuda and Hong Kong and Satmex of Mexico to join forces to purchase four Boeing-built telecommunications satellites employing a revolutionary design is one way smaller players can realize the scale economies usually reserved for larger fleet operators, industry officials said.
ABS Chief Executive Thomas Choi cautioned that the deal, which includes options for four additional Boeing 702SP satellites, should not be viewed as a precursor to a merger of ABS and Satmex.
In a March 13 interview, Choi said harmonizing the development plans of two independent operators is a way of reducing the inherent advantage enjoyed by ABS’s and Satmex’s bigger competitors, who can use their size to force suppliers to accept economies of scale in satellite and rocket production.
“This deal was done to get us a volume discount,” Choi said. “In the past, only the bigger guys were able to do that. If this technology becomes viable, launch prices can become a lot more attractive.”
The contract with Boeing is valued at about $400 million for the four satellites — two for ABS, two for Satmex — plus around $130 million for two launches, each carrying two satellites, aboard Space Exploration Technologies () Falcon 9 rockets in 2014 and 2015, industry officials said.
Each satellite is expected to weigh around 1,800 kilograms at launch but to carry the payload complement normally associated with satellites of twice that weight. The weight savings comes from the decision by ABS and Satmex to pioneer use of all-electric satellites.
While many telecommunications satellites over the past decade have featured use of electric propulsion to maintain their positions stably in orbit, none has ever opted to use electric thrusters to carry the satellites from their rockets’ drop-off point in transfer orbit to final geostationary position.
Boeing Space and Intelligence Systems of El Segundo, Calif., has been working on an all-electric design option for its 702 satellite frame for about two years.
“Nobody else has this product,” Choi said. “It’s just Boeing. If someone else had had it we would have considered other manufacturers.”
Boeing estimates that the ABS and Satmex satellites will each carry between 300 and 350 kilograms of xenon propellant for the electric thrusters, compared with around 2,000 kilograms of conventional fuel that satellites of this power — up to 8 kilowatts — and a payload of 40-plus transponders would normally carry.
The difference means that a Falcon 9 rocket costing $65 million will be able to carry two satellites instead of one, with little or no increase in launch cost.
Stephen T. O’Neil, president of Boeing Satellite Systems International, said the company will be installing on the Satmex 7 and ABS-3 satellites the same 25-centimeter xenon-ion propulsion systems that Boeing has built for 18 larger satellites already in orbit, but adding more fuel.
With an eye to future customers and to satellite insurance underwriters wary of unproven hardware, O’Neil said: “There is no new technology being used here. It is all proven.”
A 6,000-kilogram Boeing 702HP satellite using a mixture of chemical and electric propulsion for in-orbit station-keeping will carry around 265 kilograms of xenon propellant, according to Boeing.
The downside to electric propulsion — the time delay in getting to final position — was made clear when two satellites carrying it just for minor orbital position adjustments were forced to rely on it to climb from their drop-off points to geostationary position because of rocket failures or on-board propulsion failures.
The European Space Agency’s Artemis data-relay satellite in 2001 took 18 months to reach its final position after relying on its electric propulsion to make up for underperformance of its Ariane 5 rocket. The U.S. Air Force’s first Advanced Extremely High Frequency telecommunications satellite took 14 months to reach geostationary position using its electric thrusters after its main propulsion system failed at launch in August 2010.
O’Neil estimated that the ABS and Satmex satellites would take four to six months to reach their geostationary-orbit destinations.
Other satellite manufacturers said during the Satellite 2012 conference here March 13 that they are already working on similar designs, but said they might have difficulty reaching the aggressive price points implied in the ABS/Satmex deal.
John Celli, president ofof Palo Alto, Calif., said his company will be introducing an all-electric design within a year and hopes to be able to reduce the amount of time the satellites take to reach final position to three or four months.
Evert Dudok, president of Astrium Satellites of Europe, said Astrium, which has used electric propulsion for station-keeping, is working on its own version of an all-electric satellite.
The agreement could catapult ABS — a company that just five years ago had no more than a few million dollars in annual revenue — into a position as a global satellite operator with strongholds in South America in addition to Asia.
It could also help solidify Satmex, a company that exited Chapter 11 bankruptcy proceedings in mid-2011 with a $325 million loan, in its home region.
Choi said the ABS-3A satellite using the all-electric design will be stationed at ABS’s 3 degrees west slot, where it recently placed its ABS-3 satellite, the former Agila-2 spacecraft that was launched in 1997. ABS purchased the satellite in November 2009.
ABS and Satmex did not disclose the orbital destinations for the two other satellites they are ordering from |Boeing.
But in his remarks, Choi outlined his view of why it is imperative that ABS expand beyond its regional base to establish a near-global presence.
Choi said ABS has grown from a company with just $4 million in revenue to one that next year expects to report revenue of $280 million. It has stitched together a fleet of four satellites that it purchased in orbit from former owners that no longer viewed satellite operators as a core business.
ABS has raised more than $250 million in bank loans in 2011, and struck deals with broadcasters to sell space on ABS-owned satellites in what is known as a “condosat” arrangement. “Our objective is to become a global satellite operator,” he said.
Choi has long said that the economics of satellite fleet operators argues in favor of scale, and that ABS would need to grow it is to survive in what he said is likely to be several lean years for the satellite telecommunications industry in general as North America and Europe work through their government-debt crises.
Choi also critiqued the satellite industry for not being imaginative enough.
“I believe there is not enough creative destruction in our industry” Choi said, adding that the major satellite operators, both in fixed and mobile services, “are more or less doing the same thing” they have done for years.
In 2010, private-equity firm Permira acquired a majority stake in ABS. Permira has previously owned stakes in larger satellite fleet operators — of London and of Washington and Luxembourg — before cashing out.
ABS and Satmex both have large, conventionally designed satellites under construction with Space Systems/Loral of Palo Alto, Calif.
One link between the two companies is Jim Frownfelter, a former Intelsat chief operating officer who sits on the board of Satmex and is chairman of the board of ABS.